Thomas Cook’s financial crisis was laid bare today as the travel giant set out plans to close 200 stores with the loss of hundreds of jobs.
The 170-year-old group, which came close to collapse last month, racked up losses of almost £400 million after a year in which the slump in consumer confidence and the Arab Spring wrecked demand for its package holidays.
It will close 200 loss-making stores over the next two years as their leases expire – 125 more than previously announced – after completing a recent merger with the Co-op’s high street travel arm.
The company, which has 1,300 shops, confirmed that 661 staff in 115 stores are expected to be told today and tomorrow that their branch could close.
It has set out a turnaround plan for the UK business, including focusing on fewer and better quality hotels and more online bookings.
But analysts said it faced another difficult year as the UK teetered on the edge of another recession.
Interim chief executive Sam Weihagen said: “There’s no silver bullet to turning around the UK business but I’m confident that the measures will improve the profitability in years to come.
“Thomas Cook is a very strong brand in the UK and it has enormous possibilities to make sure it becomes a profitable business.”
The company was plunged into crisis last month after it went back to its lenders to ask for an additional £100 million lifeline, sparking fears of a collapse.
It admitted there had been an “adverse impact” on bookings in the UK before it agreed a new package with lenders although it said demand has largely recovered.
The group said it was encouraged by an 8 per cent rise in bookings from UK customers for next summer, although UK bookings for the current winter season were down 11 per cent.
Its UK business saw its underlying profits fall 68 per cent to £34.1 million in the year after its margins fell to just 1 per cent and disruption from the Arab Spring cost it some £15 million.
This was partly offset by record profits from its businesses in Germany and Scandinavia.
Impairments and write-downs on the value of its UK and Canadian businesses and for a large IT project, helped push it into a £398 million pre-tax loss in the year to September 30, compared with a £42 million profit the year before.
Stripping out the exceptional charges, the group made underlying profits of £175 million, 29 per cent less than the previous year.
Thomas Cook plans to sell £200 million of its assets over the next 18 months as part of its plans to take a chunk out of its debt mountain, which rose by 11 per cent to £891 million in the year.
Yesterday, the company sold a stake in five hotels and a golf resort in Spain as part of this drive.
The store closures come a year after its merger with the Co-op’s UK high street travel business.